Old Colony Trust Co. v. Silliman

Decision Date06 February 1967
Citation223 N.E.2d 504,352 Mass. 6
PartiesOLD COLONY TRUST COMPANY et al., exedutors, et al. v. Claude W. SILLMAN et al.
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court

Carlton W. Spencer, Boston (Arthur O. Ricci, Boston, with him), stated the case.

James J. Kelleher, Asst. Atty. Gen., for the Attorney General.

Edward R. Bonitz, Belmont, guardian ad litem, pro se.



The issue on this petition for instructions has been reserved and reported without decision by a judge of the Probate Court for Middlesex County. G.L. c. 215, § 13.

Old Colony Trust Company and Ernest C. Burdick as executors under the will of Amelia Silliman Rockwell, and Old Colony Trust Company as trustee under that will, seek instructions in respect of the power of the trustee under Article II G1 of the will providing, 'My said trustee may decide whether accretions to the trust property shall be treated as principal or income and whether expenses shall be charged to principal or income.' The instructions are sought so that the trustee may know the extent of its power and authority under Article II G1, and to aid the executors in determining whether to bring suit against the United States for the recovery of estate taxes paid in the following circumstances.

The will set up a trust (Old Colony Trust Company, the trustee) and provided for the payment of all the trust income to named individuals and members of family groups. Such income interests were to terminate on stated happenings, and the income theretofore payable to an individual or individuals was to be paid to Old Colony Trust Company as the trustee for the charitable purpose specified in the will. Upon the ending of all such individual income interests the principal of the trust, with any unexpended income was to be transferred to the trustee of the trust for charitable purposes.

Because of the gifts to charity, the executors in their Federal estate tax return claimed a deduction under § 2055 of the United States Internal Revenue Code of 1954. Much of that claim having been disallowed, the executors paid the assessed deficiency, and filed a claim for refund. After the filing of the petition for instructions the claim for refund was disallowed on the ground that '(v)alues of charitable remainders not presently ascertainable because trustee empowered to decide whether accretions to trust property shall be treated as principal or income, and whether expenses shall be charged to principal or income.'

Individuals interested under the will were named as parties and the petition has been taken for confessed against them. A guardian ad litem, appointed to represent minors and unknown or unascertained persons, and the Attorney General have appeared and filed briefs taking a position like that of the petitioners. Counsel for the petitioners sent letters by certified mail to the Internal Revenue Service and to the District Director of Internal Revenue giving notice of the petition, and inviting an appearance or the filing of a brief as amicus curiae.

1. We rule that there is jurisdiction and that it is appropriate to entertain the petition. What the executors should now do in respect of Federal taxes is presently at issue and in doubt. A petition for instructions to enable executors to prepare a Federal estate tax return and claim a proper deduction was entertained in Watson v. Goldthwaite, 345 Mass. 29, 31, 35, 184 N.E.2d 340. See Second Bank-State St. Trust Co. v. Second Bank-State St. Trust Co., 335 Mass. 407, 409, 140 N.E.2d 201. The State court's interpretation of such a provision is determinative of its meaning notwithstanding that the issues depending upon the interpretation will be litigated in a Federal court. Freuler v. Helvering, 291 U.S. 35, 44--45, 54 S.Ct. 308, 78 L.Ed. 634; Blair v. Commissioner of Int. Rev., 300 U.S. 5, 9--10, 57 S.Ct. 330, 81 L.Ed. 465.

The uncertainty as to the extent of the trustee's discretion under such a provision as Article II G1 is shown by the majority opinion and the dissenting opinion in State St. Trust Co. v. United States, 263 F.2d 635 (1st Cir.). See also Proceedings of the American Bar Association, Section of Real Property, Probate and Trust Law, August 9--11, 1965, pp. 189--195. The view that underlies the majority opinion in the State Street case and, as it appears, the decision of the Internal Revenue Service denying the refund claim, stems from Dumaine v. Dumaine, 301 Mass. 214, 224, 16 N.E.2d 625, 118 A.L.R. 834, and certain language of the opinion. The appropriateness of a direct ruling by this court as to Article II G1 is emphasized by the comment of this court in a footnote to the opinion in Boston Safe Deposit & Trust Co. v. Stone, 348 Mass. 345, 351, fn. 8, 203 N.E.2d 547, 552: 'As Chief Judge Magruder indicated (at p. 641) in his dissent in State St. Trust Co. v. United States, 263 F.2d 635, 640--642 (1st Cir.), a Massachusetts court of equity will 'supervise the administration of * * * trusts so as to control any attempt to shift the incidence of their enjoyment.' Even broadly expressed administrative and management powers (see p. 642) 'are limited by standards which the Massachusetts court of equity could and would apply to supervise effectively * * * (proper trust) administration.' We disagree with any suggestion to the contrary (at p. 639) in the majority opinion in that case, which unduly relies upon somewhat general language in Dumaine v. Dumaine, 301 Mass. 214, 16 N.E.2d 625, 118 A.L.R. 834. A fair reading of the whole of most trust instruments will reveal a 'judicially enforceable, external, and ascertainable standard' for the exercise of even broadly expressed fiduciary prowers. See United States v. Powell, 307 F.2d 821, 826 (10th Cir.).' As we indicate below, we adhere to this view.

We do not overlook the suggestion of the Supreme Court in the Freuler case (291 U.S. at 45, 54 S.Ct. 308) that the conclusiveness of the State court construction may depend upon its being made in due course of an adversary proceeding. We conclude, however, as has the Rhode Island court in a similar, nonadversary,...

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